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Mukesh Ambani's Reliance Industries is slugging it out with fuel retailers in Gujarat.
About 75 outlets in the state, where the company runs two refineries, have decided to exit the RIL dealership.
Of the 225 operational retail outlets that RIL has in Gujarat, 150 are dealer owned, dealer operated or company owned, dealer operated.
The other 75 are company owned, company operated. "About 75 dealers recently gave a clean exit letter to RIL.
"But the company has not responded. We have been running the outlets in losses for over four years now. The rates at which RIL sells its fuel is very high and we do not get customers," said Sunil Golwala, President, Gujarat Reliance Petrol Pump Dealers Association.
The dealers say they invested between Rs 2 crore (Rs 20 million) and Rs 4 crore (Rs 40 million) in each outlet.
Depending on the location, the cost of land is between Rs 1.5 crore (Rs 15 million) and Rs 3 crore (Rs 30 million), with another Rs 30 lakh (rs 3 million) to Rs 1 crore (Rs 10 million) thrown in on maintaining the services at the outlets.
The company takes care of the services cost at CODO outlets.
"It has been a completely loss-making proposition for us. Four years of investment and we have not gained anything substantial so far," said a dealer, who did not wish to be named.
'Money back or FIR'
Every dealer gave the company a security deposit between Rs 13 lakh (Rs 1.3 million) and Rs 33 lakh (Rs 3.3 million), depending on the site.
With the dealers exiting, RIL may have to release the deposit. Golwala said if the company did not revert in the next 10 days, the dealers are planning to file a police complaint against Mukesh Ambani.
An RIL official declined to comment on the matter.
An email to RIL remained unanswered.
RIL had earlier negotiated on buying the sites from the dealers.
"While we have already been making losses, the company said it can buy back our sites. But it offered only Rs 2 crore (Rs 20 million) for a site worth Rs 4 crore (Rs 40 million).
"We had met Parimal Nathwani, group president, Reliance Industries, who said he will grant us clean exit documents but nothing has happened so far," added Golwala.
Some of these dealers plan to approach the public sector oil marketing companies -- Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation -- and seek dealership.
RIL had in May 2008 closed its outlets due to mounting losses, as it was selling fuel much above the subsidised retail prices of state-owned oil companies.
Last October, RIL began re-opening its retail outlets. So far, the company has re-opened 667 outlets in the western and southern regions, though it has less than 0.5 per cent market share, with a total of 1,450 fuel retail outlets, according to industry players.
While the going has not been smooth for RIL in petroleum retailing, Essar Oil is looking at expansion in the Indian market.
It has 1,341 fuel outlets operational and plans to scale up its retail outlets to 1,700 by March 2011. Essar Oil says it follows the franchisee model, which unlike a company owned and operated model, allows it to take the market swings.
Most of its outlets are in the western part of the country. It says it would expand in the southern parts.
Another private retailer, Shell India, the domestic arm of Royal Dutch Shell Plc, has offered for sale around 20 of its 80 operational retail outlets and around 20 sites acquired for setting up such outlets.
It has approached oil marketing companies, both public and private, regarding this.
Image: mukesh Ambani
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